Are Hot Housing Markets Seeing ‘Mini’ Bubbles?

Home prices rose by 0.9% in May from the previous month, and by 0.4% from one year ago, according to a home price index released Friday by Lender Processing Services.

The index is the latest to show strong price gains for the country as a whole this past spring. Home prices are up by 3.2% since the beginning of the year.

Earlier this week, Developments looked at four other indexes that track home prices. LPS says its index is more timely than Case-Shiller or CoreLogic by using transaction dates, as opposed to recording dates. (Home sales aren’t always recorded immediately upon the closing.) It also covers more than 15,000 ZIP codes, accounting for at least 83% of the country.

Like those other indexes, LPS uses a repeat-sales formula, measuring price changes among similarly-situated properties. It reports numbers that aren’t seasonally adjusted, though it also tracks seasonally-adjusted figures.

Among the 40 top metros, Phoenix had the largest monthly price gain, at 2.1%, followed by Charlotte, N.C., at 1.7%, and San Jose, Calif., at 1.5%.

Robert Shiller, the Yale University economist and co-founder of the Case-Shiller index that bears his name, said Tuesday that the housing market definitely has some “upward momentum.” But he told Fox Business it was also hard to tell how much of it was related to seasonal factors—housing demand is strongest in the spring, so prices are more likely to rise in May and June.

Mr. Shiller also warned that some markets could be seeing mini-bubbles. “The real question that is on my mind is, are we possibly off to the races again?” he said. In markets like Phoenix and San Jose, “We might see something pretty big developing because people there are very speculative-minded right now.”

While the Case-Shiller index showed prices in Atlanta are down by 14.5% from one year ago, the LPS index says the drop has been less severe, at around 4.5%. It also measured less of a gain in rebounding markets such as Phoenix, with a year-over-year increase of 9.6%, compared to an increase of 11% reported this week by Case-Shiller.

LPS found that Atlanta and Baltimore were the worst performing of the largest 40 metro areas over the past year, with both down by 4.5%. Prices in May were down from April in only one of those 40 metros: Columbus, Ohio, posted a 0.2% decline.